Is LIC going to be privatized?

Privatisation of Life Insurance Corporation

The government has assured that privatization of Life Insurance Corporation is not intended. The government planned to raise LIC’s IPO in the market for raising Rs 40000 crores to Rs 1 Trillion which leads to filling the gap in the budget. For diversification and high demand in different investors segment, the government is allowing FDI in Life insurance corporations.

Junior finance minister Anurag Thakur stated that the government is bringing IPO, the decision of share dilution is yet to be done, further he added that due to the proposed IPO of LIC no one is going to lose their job in LIC.

In the Annual financial statement, the 2022- 2023 government disinvestment target is revised for the financial year 2022 to Rs 78000 crores from Rs 1. 75 lakh crore of the budget estimate. The target for the financial year 2023 is even lower of Rs 65000 crores. From disinvestment in minority stakes of the public sector as well as privatization of Air India government has raised around Rs 12000 crores and the remaining is assumed to be brought by IPO of LIC. The IPO of LIC completes the disinvestment target of the government and reduces the fiscal gap which provides stability to the economy of India.

About IPO (Initial Public Offering)

In Initial public offering (IPO) the shares of a company are sold to retail investors and institutional investor. After IPO the shares of the company are trade freely in capital market or we can say that IPO are the fresh shares of a company in market and IPO are the part of primary market.

Response of LIC employees

The employees of Life insurance corporation (LIC) protested against the decision of government and condemn the government’s decision of increasing FDI in insurance sector from 49 percent to 74 percent and disinvestment of Life insurance corporation shares in IPO.
LIC chairman MR Kumar stated that IPO of LIC will not provide any impact to the employees as well as the customers of the state owned life insurer.

Understanding Privatisation:

Privatization can be defined as the transfer of Public/government owned or Public/government operated means of production into the private operation or ownership.
In case of Privatisation, what to produce, price of product and quantity of production is governed by the private sector which is market based whereas in case of public sector what to produce, price of product and quantity of production is governed by the public sector which is government based.

ADVANTAGES OF PRIVATISATION:

• Open economy.
• High competition in market.
• Political interference is reduced.
• Sustained growth in productivity.
• Enhancement of gainful employment.
• Encouraged external trade and private sector investment.
• Government have surplus funds for public investment.
• It helps country in becoming major partner and player in global arena.

DISADVANTAGES OF PRIVATISATION:

• Higher price for consumers.
• Privatisation increases the inequality.
• Privatisation can create private monopoly.
• Privatisation will ignore the weaker sections.
• Unemployment will increase. Human resource are side-lined.
• Privatisation are focussed to the areas which are suitable for profit purpose.
• Privatisation are focussed on profit maximisation therefore social welfare are left behind.